Ivar Bolander, Rupa Jack and Craig Franklin are senior adviser at Sonoma Wealth Management Group in Santa Rosa. They answered Business Journal questions about wealth management.
What difference does age of a client make in what you suggest to them as an investment strategy?
Typically people in their 20s are interested in objectives like paying off their student loans, starting a new job or starting a business, and starting to save. As they enter their 30s, their focus changes to things like getting married, starting a family, and starting to accumulate wealth. As they get closer to retirement their attention moves to retirement and cash flow planning, estate planning, and legacy planning. Each of these phases influences their financial plan and thus their investment strategy.
Clearly age is important, but equally important are other client factors such as the client objectives, income needs, asset levels, time horizon, risk tolerance and overall financial and estate planning goals. We have found there is no one size fits all or “formula” that defines an appropriate investment strategy. With thoughtful financial planning, it is possible to help clients identify the appropriate investment strategy given their age and objectives
How do you help a client determine what level of risk they are comfortable with when it comes to investing their money? Are there key questions you ask to assess that risk?
We ask key questions designed to help us understand the client’s attitude toward risk and return. Their answers help us consider an asset allocation strategy that best suits their long term investment objectives. But there is more to it.
We have a unique risk management solution that enables us to have a deeper understanding of client portfolios, helping us work with our clients to manage risk while proactively guiding their wealth. Our dynamic platform leverages state-of-the-art analytics to identify various elements of risk in client portfolios, down to the security level, and model the impact of potential adjustments, before portfolio changes are made.
We can show hypothetical performance based on factors and simulated market shocks such as a drop in the S&P 500 or historical scenarios such as the 2008 Financial Crisis. This allows us to pinpoint specific drivers of risk for client assets held here and away. Thus helping us provide more thoughtful advice on the client’s assets.
Using a suite of tools that include goal-specific analysis we are able to create a personalized wealth strategy that integrates the various aspects of our client financial life, including their investments and cash management needs, time horizon, and their attitude towards risk.
With faster technology, algorithms to pick stocks and instantaneous investments, are clients making more frequent moves with their money, not being content to stay with investments for the long haul more these days? What do you tell them if you consider this approach unwise?
We are not seeing an increase in trade frequency due to faster technology or algorithms with our clients. That is because we help our client understand that “staying the course” in regards to a client’s financial plan rather than making frequent trades is a significant contributor to helping our clients move closer to attaining their goals.
Taking a longer-term perspective and not reacting instinctively to volatility can help preserve or enhance gains and minimize losses. For long-term equity investors, an investor’s time horizon is directly associated with the likelihood that a portfolio will experience positive returns.